Do old people hurt growth?

A new paper (PDF) claims that ageing populations will hinder growth by both dis-saving and dragging down innovation, thus reducing productivity. Using a VAR model, they relate the age structure to measures of growth, saving, investment, and other macroeconomic variables over the 1990-2007 period. They use those coefficients to predict the effect of demographic change on growth rates in the current decade. The results are dramatic, predicting that an ageing population will knock over a percentage point off some countries’ growth rates.

In a ray of light, this morning’s FT (£) reported a study of over 15,000 German employees that examined the relationship between ageing and productivity. One of the authors is quoted saying:

As workforces age, employers are concerned that productivity will decrease. That is not so. What matters is not chronological age but subjective age.

The research suggests that older people are systematically excluded from training activities, and are relegated to less creative and meaningful work, which renders them less productive. As the workforce ages, that may begin to change. As it changes, the relationship between growth and age structures is likely to weaken.

Performance pay for the public sector?

In December last year The Work Foundation released a comprehensive review of performance-related pay in the public sector:

PRP schemes can be effective in improving outcomes across the three public services for which evidence is available (health, education and the civil service), although the central conclusion is that the outcomes from PRP are mixed, which much dependent upon organisational and occupational context and scheme design and implementation. Where positive effects have been found, effect sizes are sometimes small and may also be short-lived. As well as evidence gaps across much of the public services, the weight of evidence also varies, with the more robust evidence coming from education and health rather than the civil service. Cost-effectiveness data to assess the value for money of PRP interventions is also rare.

The implication is that performance-related pay isn’t a quick fix: it requires careful development to fit it to the context, and organisations might take a while to adapt to it and see benefits. Without more examples in the public sector it isn’t possible to say whether it will prove cost-effective.

Quick note: Earnings inequality and aging

Note:  I know I’m not replying to comments right now, I’m very sorry.  It isn’t you, it is me – this time of year is always pretty full on for me!  Keep an eye out – in the next couple of weeks I will find time to turn around and comment back.  Post will be a touch lighter as well – but I will try to have at least three things up a week!

Via Twitter came this cool graph from Wiki New Zealand.

I’m going to quickly note something from that graph.   Read more

Labour day: Jobs as a cost?

Today is Labour Day in New Zealand – and given I’ve written about “co-ordination” so recently I can’t do one of those posts where I talk about public holidays as a co-ordination device.  Instead I intend to discuss the costs and benefits of “jobs” – or the costs of benefits of supplying your labour ;)

Read more

NZ isn’t the US: Employment rates

So often we hear that, even though the unemployment rate is falling in the US, employment is low.  It is the low level of employment, and the lack of integration in the community that entails, that is causing so much anger over there.  The lack of opportunity illustrated through the low employment rate is one of the key pieces of information pulled out to suggest something must be done.

Often people in New Zealand talk as if whatever is happening in the US is happening here, therefore something must be done.  However, lets be a bit more careful – especially as in the case of the employment rate that is untrue.

 

remprSource:  Stats NZ.  Quandl.

Yes, the story is more complicated (Working for families increased the number of second earners in the labour market, a factor that will in of itself have pushed up the participation and employment rates).  But if anything that suggests we need to be a lot more careful applying “lessons” from the US situation to New Zealand.  We are not the United States – a point we’ve noted when looking at median income comparisons in the past ;)